Analysts Slam DeVry after Warning; Sector Falls

By Avi Salzman

Many analysts reacted bearishly a day later in their outlooks, slashing their price targets and their views.

R.W. Baird analyst Jeffrey P. Meuler cut the price target on DeVry to $23 from $35. “In our view, the fundamental weakness is due to a confluence of transitory and secular headwinds, and we believe some investors may be underestimating the industry’s secular challenges,” wrote Meuler.

Shares of Devry were down 24% in trading, while Apollo Group (APOL) tumbled 4.1% on Tuesday. Career Education Corp. (CECO) fell 7.5%.

Analyst Sara Gubins of Bank of America Merrill Lynch downgraded DeVry to Neutral and lowered the price objective to $23 from $37, writing, “We expect the worst of the start declines are behind us. However, we expect another term of undergrad start declines in the Fall. Like others, starts are being hit by a tough economy, a longer selling cycle, and lower admission advisor productivity.”

Not all analysts were woeful on the sector. In a sector initiation note, JP Morgan analyst Jeffrey Y. Volshteyn noted that the sector still makes money and expects the industry to grow its enrollment 2%-7% over the coming term.

“We think that private sector colleges and universities (PSCU) sector fundamentals remain attractive, as new enrollments likely inflect up in late 2012/early 2013 for most players, student demand normalizes, and pricing steadies,” wrote Volshteyn.

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JULY 24, 2012 4:48 P.M.

drrichard wrote:

"Confluence of transitory and secular headwinds, and we believe some investors may be underestimating the industry’s secular challenges.” As opposed to relilgious challenges? If I had a financial advisor who said something as convoluted as that I would quickly find another person.

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